In preparation for your report in Project Two, you will need to  calculate the financial ratios needed to determine your chosen  business’s current financial health. Once you’ve calculated these  ratios, the results will be used to analyze the business’s current  financial position and help them make decisions about how to improve or  maintain their financial health. Pay particular attention to working  capital management. If liquidity is an issue, consider how the company  will meet its short-term obligations.

/in /by

Overview

In preparation for your report in Project Two, you will need to  calculate the financial ratios needed to determine your chosen  business’s current financial health. Once you’ve calculated these  ratios, the results will be used to analyze the business’s current  financial position and help them make decisions about how to improve or  maintain their financial health. Pay particular attention to working  capital management. If liquidity is an issue, consider how the company  will meet its short-term obligations.

Prompt

Using the Project Two Financial Formulas spreadsheet and the balance sheet, income statement, and cash flow statement from Mergent Online for your chosen company, calculate the financial ratios for the most recent fiscal quarter. Then,  compare those ratios with the same ratios for the same fiscal quarter  from one year prior in Mergent Online, and analyze your results.

Specifically, you must address the following rubric criteria:

  • Financial Calculations: Calculate accurate  financial ratios to assess the business’s current financial health.  Specifically, calculate the following ratios:
    • Working capital
    • Current ratio
    • Debt ratio
    • Earnings per share
    • Price/earnings ratio
    • Total asset turnover ratio
    • Financial leverage
    • Net profit margin
    • Return on assets
    • Return on equity
  • Fiscal Quarter Comparison: Using Mergent Online, summarize the differences between the results from your financial calculations of the most recent fiscal quarter and the results of the same financial calculations of the same fiscal quarter from a year before for your chosen business.
    • For example, if the most recent fiscal quarter available is the 3rd  quarter in 2020, then you will compare those results to the same  financial calculations from the 3rd quarter in 2019.
  • Comparison Analysis: Explain what the results of  your calculations and your comparison indicate about the business’s  current financial health, providing examples to support your  explanation. You might consider the following questions:
    • Do the results indicate the business is financially healthy or financially unhealthy? Which results indicate this?
    • What might be the cause(s) of the business’s financial success or failure?
    • Is more information needed to determine the business’s financial  health? If so, which pieces of information might still be needed?
  • Short-Term Financing: Explain how potential  short-term financing sources could help the business raise needed funds  to improve its financial health. Base your response on the business’s  current financial information.

The following resources can help you complete this milestone:

Video: Mergent Online: Public Company Financials (4:46)
Watch this video from the Shapiro Library to learn more about how to access and use Mergent Online.

Shapiro Library FAQ: How Do I Cite a Company Profile From Mergent Online?
Use this resource to help answer any questions you have about citing from Mergent Online.

Guidelines for Submission

Your submission should be a 2 to 3 page Word document with 12-point  Times New Roman font, double spacing, and one-inch margins. You must  also submit the Project Two Financial Formulas spreadsheet  (which you will fill in completely as part of your Project Two  submission) and the Excel files for your downloaded balance sheet,  income statement, and cash flow statement from Mergent Online.